Foreign judgments and BVI insolvency proceedings: the impact of the Supreme Court's decision in Drelle

The English Court of Appeal’s decision in Servis-Terminal LLC v Drelle [2025] EWCA Civ 62 ("Drelle") has been controversial in holding that an unrecognised foreign court judgment could not form the basis of bankruptcy proceedings in England and Wales. The reasoning was that a foreign judgment has no direct operation unless and until it has been recognised, and insolvency proceedings should not be used as a substitute for recognition proceedings. This has given rise to uncertainty in the BVI as to whether foreign judgments could form the basis of insolvency proceedings, a position that had previously been considered reasonably well settled.

By overturning the the English Court of Appeal's ruling in Drelle, the UK Supreme Court has reopened the path to initiating BVI insolvency proceedings based on unpaid foreign judgment debts without prior recognition. The wider impact is considered further in this article, but the decision is positive news for creditors enforcing foreign judgments in the BVI.

Background and context

The BVI court’s insolvency jurisdiction is frequently engaged in the enforcement of foreign judgment debts and arbitral awards. Historically, it was generally considered permissible to serve a statutory demand and apply to appoint liquidators in the BVI on the basis of an unpaid foreign judgment debt without needing to seek prior recognition of the judgment, provided that the foreign judgment was enforceable under broad common law principles. That reduced the time and costs associated with a two stage process and facilitated a more streamlined approach to enforcing payment of foreign judgment debts using the court's insolvency process. The reasoning of the English Court of Appeal in Drelle cast significant doubt on that presumption.

JJW Hotels

The issue recently came before the BVI Commercial Court in JJW Hotels & Resorts Holding Inc v Rhodes BVIHC (COM) 2025/0296, in a decision of Justice Abbas Mithani KC dated 31 March 2026 ("JJW"). That case concerned an application to set aside a statutory demand served against a BVI company to seek payment of certain costs orders made by the Guernsey Royal Court, which had not been recognised in the BVI. The central issue was whether those orders could amount to a debt that was ‘due and payable’ for the purposes of a statutory demand under section 155 of the Insolvency Act 2003 (or, by the same token, a debt capable of founding an application to appoint liquidators).

The BVI Commercial Court focused much of its judgment on the reasoning of the English Court of Appeal in Drelle, drawing a distinction between two different categories of obligation. On the one hand, there may be an underlying debt or liability which exists independently of the foreign decision, such as a contractual debt later confirmed by an arbitral award. On the other hand, there may be a liability which exists only because a foreign court made an order, such as a costs order. In JJW Hotels, the BVI Commercial Court considered that the Guernsey costs orders fell into the latter category. The judge expressly agreed with the English Court of Appeal's analysis, concluding that it reflected "a long-established principle of private international law… [that] …foreign judgments have no direct operation outside the territory of the state from which they emanate and are only enforceable through the machinery of the domestic court upon recognition. Until such recognition is obtained, they do not give rise to rights enforceable within the forum."

The BVI Commercial Court went on to distinguish the Privy Council’s decision in Vendort Traders Inc v Evrostroy Grupp LLC [2016] UKPC 15 ("Vendort"), where an application to set aside a statutory demand based on an unrecognised foreign arbitral award was refused. In Vendort, the relevant debt was treated as arising from an independent underlying contractual obligation, with the foreign arbitral award operating as conclusive evidence of that liability. The decision in JJW sought to confine the effect of the Privy Council's decision in Vendort to cases where the obligation relied upon exists independently of the foreign adjudicative act, and in particular to foreign arbitral awards, as distinct from foreign court judgments.

The statutory interpretation point in JJW

In the JJW decision, Justice Mithani considered the scope and effect of section 296(2) of the Insolvency Act 2003, which applies only to personal bankruptcy applications, but which expressly states that a bankruptcy order may not be made in respect of a liability incurred outside the BVI unless it is enforceable by execution in the BVI. The judge acknowledged that section 296(2) did not apply to corporate insolvency, but he held as a matter of statutory interpretation that the Act impliedly required any judgment debt to be recognised prior to any corporate insolvency application. The judge held that the legislature could not have removed what he described as a "fundamental private international law protection" except by using express words, rather than the absence of words in the statute.

The judge appears to have concluded, on this basis, that the demand in JJW could be set aside even if Drelle was wrongly decided by the English Court of Appeal, or if that decision was inapplicable in the BVI. That was a controversial finding in circumstances where the judge had, at least in part, relied on the decision in Drelle in reaching his finding that prior recognition of a foreign judgment was a "fundamental private international law protection". The impact of the decision in JJW, therefore, was that unpaid foreign judgment debts might not be capable of forming the basis of a statutory demand or a liquidation application, unless those judgments had previously been recognised at common law (or, in the case of registrable judgments from a limited number of jurisdictions, including England, registered under the statutory regime).

The UK Supreme Court’s clarification in Drelle

The UK Supreme Court has now unanimously allowed the appeal in Drelle as it related to the threshold question of whether a foreign judgment was capable of being the basis for insolvency proceedings, in a decision handed down on 27 July 2026 ([2026] UKSC 29). The Supreme Court held that, at common law, an unrecognised and unregistrable foreign judgment for a debt or definite sum of money gives rise to an immediate obligation on the judgment debtor to pay the judgment sum, provided the judgment is given by a court of competent jurisdiction, is final and conclusive, and is not otherwise impeachable.

The UK Supreme Court rejected the view that the statement in Dicey & Morris that a foreign judgment has ‘no direct operation’ means that it has no legal effect unless and until recognised. Rather, the phrase means that the foreign judgment cannot be enforced directly as though it were an English judgment, for example by ordinary methods of execution. It does not prevent the foreign judgment from giving rise to a common law obligation which may itself be relied upon.

The UK Supreme Court’s reasoning is significant because it restores the orthodox common law ‘obligation principle’ as the foundation for enforcement of foreign money judgments. On that analysis, the foreign judgment is not treated as an exercise of foreign sovereign power operating directly in the forum. It is treated as giving rise to a recognised common law obligation to pay the judgment sum. That obligation may, in an appropriate case, support insolvency proceedings.

Why this matters in the BVI

The decision in JJW is a first instance decision which has no binding effect on other first instance judges of the same court. However, all reasoned decisions at first instance carry a degree of authority as a statement of law. As such, prior to the UK Supreme Court's decision, the decision in JJW is likely to have been followed in similar cases. 

The UK Supreme Court’s decision is not strictly binding authority in the BVI, but as a decision on a key principle of private international law, the reality is that the BVI courts are very likely to follow the decision insofar as it confirms that prior recognition is not a precondition for commencing insolvency proceedings on the basis of an unpaid foreign judgment debt.

There is a remaining element of uncertainty created by the finding in JJW based on statutory interpretation of the BVI Insolvency Act. However, it is likely that the finding that the Insolvency Act impliedly retained the "fundamental private international law protection" in relation to foreign judgments was misplaced, because the UK Supreme Court has now held that there is no such protection at common law.

As such, whilst it remains to be seen how the BVI court will approach future matters in this area, it seems highly likely that the Supreme Court's ruling will re-open the path to grounding insolvency proceedings on unpaid foreign judgment debts without the need for prior recognition. That is good news for those seeking to enforce unpaid judgment debts in the BVI.